Student Housing’s Next Chapter: A Top Executive Weighs In
- Apr 26, 2021
As universities were compelled to close and send students home last March, a cloud of negativity and skepticism started looming above the student housing sector and industry players were faced with concerns regarding the pandemic-induced economic fallout. However, as uncertainties dissipated and the preleasing period started for the new academic year, optimism kicked back.
In the interview below, Michael Hales, president of CA Student Living, discusses what the health crisis meant for his company and for the student housing sector overall. Hales also reflects on some of the trends and challenges that will continue to shape the industry.
What surprised you about the student housing sector in the wake of the health crisis?
Hales: We were pleasantly surprised by what we experienced late last summer in terms of portfolio performance. The uncertainty surrounding higher education, specifically whether campuses would be reopening, was fueling negativity and skepticism towards student housing as an investment class.
While there was certainly a period of holding our breath, the pandemic has only reiterated the recession resilient qualities of this asset class. At 94 percent leased, CA Student Living outperformed its prior-year portfolio performance in 2020 and we are realizing strong pre-leasing velocity for the coming academic year including some assets already at 100 percent leased and many more at above 90 percent.
How do you see the student housing industry now, a year into the pandemic?
Hales: I believe the student housing industry is stronger than ever—the scale of the opportunity is tremendous. Not only have we been able to confirm the asset class’ recession resilient qualities in real-time, but innovation and advancement in the space have been propelled.
Our portfolio performance has been strong, and we have been able to provide something throughout the pandemic that most universities could not—apartment-style housing, units with bed-bath parity, and surety of operational status and accessibility. All of these factors have resulted in continued investor appetite and ample opportunities for both new development and acquisitions.
What was the biggest challenge you experienced since the onset of the crisis? How did you overcome this challenge?
Hales: CA Student Living was fortunate to have had pre-existing infrastructure and resources, such as virtual leasing platforms and in-house wellness expertise, that helped us to navigate several of the key challenges being faced in the industry.
In my opinion, one of the starkest contrasts between pre- and post-pandemic is communications needs—to residents, parents, staff, capital partners and beyond.
There is nothing simple about decision-making and communications surrounding a sensitive health-related, rapidly evolving matter with no precedent. We continue to be committed to providing information to all of our key stakeholders early and often.
CA Student Living’s mission is to provide experiences and connectivity. How are you pursuing this mission, considering the pandemic-induced limitations?
Hales: CA Student Living is committed to providing exceptional experiences and connectivity for both its staff and residents. From an internal perspective, we made a seamless transition to virtual operations and continue to lean on our technological infrastructure to foster collaboration, training and culture.
Last year alone, we hosted two, week-long national training conferences for property staff which have historically been in-person events. From a resident perspective, we ramped up our virtual resident engagement and revamped our marketing plans to be more conducive to a digital environment. We hosted more virtual resident events, asynchronous activities, and highly engaging social media initiatives.
How have your business strategies changed over the past year?
Hales: The beauty of specializing in a defensive investment class is that you don’t have to pivot in the face of market volatility. The past year has been a reiteration of our investment thesis. CA Student Living will continue to execute on its goal of delivering between six to eight acquisitions, and the same number of new developments per year in top-tier university markets at pedestrian-to-campus locations. From a micro standpoint, there have been several adjustments to operational tactics to best accommodate CDC guidance—some of which we actually plan to adopt as best practices post-pandemic.
Tell us about a trend that is gaining momentum in the student housing market.
Hales: Integrated technology is a prime example of an industry trend that has been accelerated because of the pandemic. CA Student Living has an in-house innovation department comprised of dedicated property technology experts that are solely responsible for improving the staff and resident experience through technology-based solutions.
Over the past few years, they have vetted dozens of software, systems and applications, and are seeing a continued increase in the number of start-ups and new products in the space, demonstrating the demand and opportunity for advancement that exists.
We are now serving the most technology-dependent and advanced generation to date, GenZ, so this is a commitment and investment we have to make to best meet the needs of our residents. As we saw with Wi-Fi, what may be considered “amenity” now will be “utility” in years to come.
How do you expect things to unfold once students return to school this fall?
Hales: We expect to see comparable trends as last year in terms of leasing and occupancy. Leasing will follow a positive trajectory right up until the start of the academic year as institutions finalize their return to campus plans and policies.
Several universities have already started to announce vaccine requirements for staff and students. With those requirements in place, we will likely see more prevalence of in-person learning options and even campus events.
Longer-term, we expect to see institutions capitalizing on the virtual learning platforms that have been finessed throughout the pandemic—increasing enrollment while not necessarily having to invest in new or expanded campus infrastructure.